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The Rational Reminder Podcast
Structured Products (Plus Just Keep Buying with Nick Maggiulli) (EP.255)
Jun 1, 2023
01:08:48
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Quick takeaways
- Understanding structured products is essential for informed investing decisions.
- Consistent investing behavior is more effective than timing the market.
- Balancing spending and saving based on long-term financial goals is crucial for wealth management.
Deep dives
The Philosophy of Just Keep Buying
Just keep buying emphasizes the importance of consistent investing behavior over trying to time the market. It suggests that focusing on regular contributions to a diversified portfolio is more effective than waiting to buy on market dips. The philosophy underlines the impact of savings rates in early years and the shift towards focusing on asset allocation and risk tolerance as portfolios grow.
Rebranding Dollar Cost Averaging
Just Keep Buying rebrands the concept of dollar cost averaging with a more aggressive and psychologically engaging approach. It promotes a continuous and data-based investment philosophy focused on a long-term perspective. The phrase takes a proactive stance towards purchasing investments regularly, even during market fluctuations, instead of attempting to time the market.
Questioning the Need for Excessive Savings
The book challenges the notion that individuals need to save excessively by highlighting data showing retirees often leave unspent wealth. It emphasizes the significance of market growth and the potential for portfolios to grow over time. By questioning the necessity for extreme frugality, the book suggests a balanced approach to investing and spending based on long-term financial goals and wealth management strategies.
Spending and Savings: Balancing Income and Money Management
The podcast delves into the relationship between income, spending habits, and savings. It argues that simply cutting expenses like daily lattes may not significantly impact financial outcomes for most individuals. The discussion highlights the importance of addressing income levels rather than solely focusing on cutting expenses to build savings. Additionally, it emphasizes the psychological benefits of spending on items that contribute to personal fulfillment and overall well-being.
Investing Strategies and Psychological Approaches to Spending
The podcast introduces two key strategies for guilt-free spending and financial planning. One method, known as the '2X rule,' involves saving twice the amount needed for a desired expense and investing the surplus. This approach aims to alleviate guilt associated with splurging by balancing it with responsible financial decisions. The second strategy suggests prioritizing fulfillment over happiness when making spending choices. By focusing on activities and purchases that offer fulfillment, individuals can enhance their overall satisfaction without solely seeking immediate happiness through spending.
Structured products can offer unique investment opportunities and customization but also come with risks and complexities. It is vital to thoroughly understand the product's structure, risks, and potential returns before investing. In this episode, we delve into the value of structured products and recap a past episode about the philosophy of money before continuing our focus on reading and finance by diving into the book, Just Keep Buying by Nick Maggiulli. Nick is a highly regarded author known for his insightful and engaging works on finance and investing. With a passion for demystifying complex financial concepts, Nick has earned a reputation for his ability to present information in a clear and accessible manner. His ability to blend storytelling with data-driven insights made his articles immensely popular among readers of all backgrounds. We discuss the pros and cons of financial products, why investors prefer them, the dark side of structured products, and what investors need to avoid. We recap a past episode with Barry Ritholtz about the philosophy of money and the main takeaways from our conversation with him. Then, we delve into Just Keep Buying and the invaluable lessons and uncover hidden gems it offers readers before speaking to Nick about savings and investing. We discuss the best strategies for investing, how to spend your money comfortably, why you should never wait for the markets to dip, and much more. To learn everything about structured products and valuable insights about saving and investing, tune in now.
Key Points From This Episode:
• Learn about structured products and what they offer investors. (0:03:12)
• Why structured products can be a problem for investors. (0:07:00)
• We discuss whether the pricing of structured financial products is fair. (0:12:05)
• How financial institutions use complexity to exploit uninformed investors. (0:14:51)
• Outline of key findings from research conducted on structured financial products. (0:17:47)
• The behavioural aspect of structured products and why investors prefer them. (0:22:20)
• A recap of the main takeaways from our interview with Barry Ritholtz. (0:26:10)
• This week’s book review of Just Keep Buying. (0:28:54)
• Nick explains the difference between saving and investing. (0:32:54)
• A comparison of just keep buying and dollar cost averaging strategies. (0:35:21)
• Whether people should wait for a dip in the market before investing. (0:37:23)
• Why you do not need as much savings as you think you need. (0:39:04)
• What the biggest lie is regarding personal finance. (0:42:29)
• Find out how to spend your money guilt-free. (0:44:13)
• He unpacks what comes after the just keep buying strategy, and how to be comfortable spending more in retirement. (0:46:48)
• Financial advice that Nick has for listeners. (0:51:03)
• The aftershow: upcoming guests, feedback about the show, and more. (0:53:59)
Links From Today’s Episode:
Nick Maggiulli — https://ofdollarsanddata.com/ Nick Maggiulli on LinkedIn — https://www.linkedin.com/in/nicholasmaggiulli/ Nick Maggiulli on Twitter — https://twitter.com/dollarsanddata Just Keep Buying — https://www.amazon.com/Just-Keep-Buying-Proven-wealth/ Episode 57: Barry Ritholtz — https://rationalreminder.ca/podcast/57 Episode 248: Professor William Goetzmann — https://rationalreminder.ca/podcast/248 Episode 253: Professor Paul Calluzzo — https://rationalreminder.ca/podcast/253 Episode 126: Dr. Brian Portnoy and Josh Brown — https://rationalreminder.ca/podcast/126 ‘The dark side of financial innovation’ — https://www.sciencedirect.com/science/article/abs/pii/ ‘Catering to Investors Through Security Design’ — https://academic.oup.com/qje/article- abstract/132/3/1469/3057435 ‘Engineering lemons’ — https://www.sciencedirect.com/science/article/abs/pii/ S0304405X21001653 ‘Ex-post Structured Product Returns’ — https://www.pm-research.com/content/iijinvest/24/2/45 Ritholtz Wealth Management — https://ritholtzwealth.com/
Animal Spirits Podcast — https://animalspiritspod.libsyn.com/ Masters in Business Podcast — https://www.bloomberg.com/podcasts/series/master-in- business Die With Zero — https://www.amazon.com/Die-Zero-Getting-Your-Money/dp/0358099765 Superfans — https://www.amazon.com/Superfans-Stand-Tribe-Successful-Business/dp/ 1949709469 Storyworthy — https://www.amazon.com/Storyworthy-Engage-Persuade-through-Storytelling/ dp/1608685489 Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder- podcast/id1426530582. Rational Reminder Website — https://rationalreminder.ca/ Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/ Rational Reminder on YouTube — https://www.youtube.com/channel/ Rational Reminder Email — info@rationalreminder.ca Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/ Benjamin on Twitter — https://twitter.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/ Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/ Cameron on Twitter — https://twitter.com/CameronPassmore Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/Get the Snipd
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